The director’s guide to shareholder activism

The role of the board in an activist environment is an important one. Directors can help ensure the company anticipates which activists might target the company, and which issues they might raise. By being familiar with activism trends, they can encourage management to proactively address common issues that are attracting attention. In many cases, these issues deserve careful attention and should be reflected in company strategy.

The board also plays a key role in shareholder engagement, and in responding to activist requests and demands. What do boards of directors need to know to navigate this environment? What can they learn from shareholders, and how can they leverage the benefits and insights activists can provide?

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Shareholder activism today

Activity in the first half of 2022 continued at a brisk pace, with a 20% jump in the number of campaigns over the same time period in 2021—although most of that activity was attributed to the first quarter of the year. more in the guide.

Source: Lazard’s Capital Markets Advisory Group, H2 2022 Review of Shareholder Activism, July 2022.

Environmental, social, and governance (ESG) matters have become a key priority for investors. In some cases, ESG issues are among several identified by the activist and specifically called out as an area for improvement. more in the guide.

Fall of 2022 could be the start of a new era of proxy contests as the SEC’s “universal proxy” rules go into effect. Potential changes to ownership disclosure requirements could also have an impact on activist campaigns. more in the guide.

Activists: Who they are and what they want

An asset manager overseeing trillions of dollars in securities pledges to vote against the boards of companies that fall short on ESG matters. A hedge fund a fraction of that size threatens a proxy fight at a company it feels has too much cash on the balance sheet. Both fall under the umbrella of shareholder activism: seeking change because they think management isn’t maximizing their targets’ potential. But while they may share an ultimate goal, their tactics can differ greatly.

Tactics: How activists pursue their goals

Some shareholders turn to activism because they feel it’s an effective way to increase the value of the companies whose stock they own. Others do so to address governance practices they believe are hurting long-term value. Or they take issue with the company’s products or business practices. Activism can take many forms. But the goal is the same: to motivate management and boards to make changes in the way their companies are run.






Risk factors: The red flags that can lure activists

Every shareholder activist has a unique agenda. But history shows that companies that attract activist engagement tend to have some issues in common. Poor performance in the stock market, weak earnings compared to peers, governance missteps, and lack of attention to ESG matters can all trigger shareholder activism.

Heading off an activist

Directors have a key role to play in being prepared. They can anticipate which activists may engage with the company, the issues they may raise, and how other shareholders might respond. They can push management to address issues that may attract activist attention. Not only can these actions help ward off an activist, but they may also help improve the company’s performance and its relationship with key stakeholders.

How to respond to an activist

When an activist comes calling, the company response is critical. An ineffective response may make things worse by giving the impression that the company’s management and board are not attuned to shareholder concerns. While the activist’s scrutiny may be unwelcome, that doesn’t mean their concerns are without merit. An encounter with a shareholder activist can make the company stronger in the long run—if it’s handled effectively.

Contact us

Maria Castañón Moats

Leader, Governance Insights Center, PwC US


Paul DeNicola

Principal, Governance Insights Center, New York, PwC US


Matt DiGuiseppe

Managing Director, Governance Insights Center, Boston, PwC US


Carin Robinson

Director, Governance Insights Center, Washington DC, PwC US


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